Orange County DA Office - MAN SENTENCED FOR DEFRAUDING HUNDREDS OF VICTIMSIN REAL ESTATE LOAN MODIFICATION SCAM

Orange County DA Office: MAN SENTENCED FOR DEFRAUDING HUNDREDS OF VICTIMSIN REAL ESTATE LOAN MODIFICATION SCAM - *Hundreds of fake letters with CitiFinancial or CitiMortgage logos sent as part of scam

SANTA ANA - A man was sentenced today to a year in jail and five years of formal probation today for defrauding hundreds of victims in a real estate scam by offering home loan modification assistance to struggling homeowners across the country. Andrew Michael Phalen, 25, Mission Viejo, pleaded guilty May 16, 2012, to one felony count of conspiracy to charge illegal upfront fees and one felony count of conspiracy to commit grand theft. As part of the sentence, Phalen will also be prohibited from engaging in similar activities during the probation period.

Co-Defendants

Jacob John Cunningham, 25, Irvine, is charged with 14 felony counts of grand theft by false pretenses and one felony count each of conspiracy to charge illegal upfront fees, conspiracy to commit forgery, and money laundering. If convicted on all counts, he faces a maximum sentence of 17 years and four months in state prison.

Justin Dennis Koelle, 22, Costa Mesa, is charged with seven felony counts of grand theft by false pretenses and one felony count each of conspiracy to charge illegal upfront fees. If convicted on all counts, he faces a maximum sentence of 10 years and eight months in state prison.

Dominic Adam Nolan, 31, Irvine, is charged with 14 felony counts of grand theft by false pretenses, and one felony count each of conspiracy to commit forgery, conspiracy to charge illegal upfront fees, and money laundering. If convicted on all counts, he faces a maximum sentence of 15 years and four months in state prison.

John D. Silva, 27, Irvine, is charged with 23 felony counts of grand theft by false pretenses, two felony counts of theft from an elder, and one felony count each of conspiracy to commit forgery, conspiracy to charge illegal upfront fees, and money laundering. If convicted on all counts, he faces a maximum sentence of 17 years and four months in state prison.

The four co-defendants are scheduled for a pre-trial hearing June 11, 2012, at 8:30 a.m. in Department C-57, Central Justice Center, Santa Ana.

Phalen was convicted of and his co-defendants are accused of the following:

Between January 2009 and March 2012, Cunningham, Koelle, Phalen, Nolan, and Silva are accused of creating numerous fraudulent loan modification businesses including CSFA Home Solutions, Mortgage Solution Specialists, Inc., CS & Associates, National Mortgage Relief Center, National Mortgage Relief Center, NMRC, NMRC Inc., N.M.R.C. Inc., Allied Home Servicing, and Allied Loan Servicing for home loan modification assistance. Cunningham, Koelle, Phalen, Nolan, and Silva are accused of sending a promotional letter to people throughout the United States with an offer to restructure their home loans, in which the defendants referred to the homeowner's specific lender and principal balance, and charging the homeowner upfront fees for loan modification services.

California Senate Bill 94, enacted into law on Oct. 11, 2009, makes it illegal in California for any person or business to demand, charge, or collect any advance or upfront fee for loan modification work or services. 

When victims called the number on the letter, the defendants are accused of falsely telling the victims that they could get a complete refund of the fee their company charged if their loan was not modified, and the company had a 95 to 100 percent success rate. After the victims gave Cunningham, Koelle, Phalen, Nolan, or Silva their money, the defendants are accused of keeping that money without securing loan modifications for the distressed victims. They are accused of not returning or refunding the victims the fee they paid for a loan modification.

In order to avoid having their theft discovered, Cunningham, Koelle, Phalen, Nolan, and Silva are accused of regularly changing the names, phone numbers, and addresses of the companies they operated.     

In late December 2011, after over a hundred victims from California and other states submitted complaints to various law enforcement agencies and the Better Business Bureau regarding the defendants' loan modification activities, Cunningham, Nolan, and Silva are accused of starting a new fraudulent scheme in which they would send out forged "Conditional Approval" letters to victims with a CitiFinancial or CitiMortgage logo in the letterhead. They are accused of stating in the forged "Conditional Approval" letters that they could offer the homeowner a low interest rate of 2.8 percent or less to refinance their home loan. Cunningham, Nolan, and Silva are accused of attaching "Escrow Instructions" with the letter, directing the homeowner to deposit between $3,500 and $4,600 directly into the defendants' bank accounts. 

Cunningham, Nolan, and Silva are accused of having no affiliation to CitiFinancial or CitiMortgage or any authorization to offer a loan on behalf of CitiFinancial or CitiMortgage. They are accused of making no efforts to qualify the victims for loans with CitiFinancial or CitiMortgage. 

In March 2012, the five defendants were arrested.

There are presently hundreds of known victims and others that are unknown both in California and out of state.  At this time, losses are estimated to be in excess of $200,000.

Deputy District Attorney Megan Wagner of the Major Fraud Unit is prosecuting this case.